Interbank rates fell as liquidity in the financial system was boosted by bullet payments from maturing OMO bills and inflows from Federal Government of Nigeria (FGN) bond coupons.
The market saw a substantial inflow of N86 billion from FGN bond coupons, in addition to further inflows from OMO bills. This increased liquidity in the money market led to a decrease in rates, following a period when local deposit money banks had sought funding support, recently in the past week, from the Central Bank’s borrowing window.
The majority of activities at the Central Bank window were driven by Tier-2 banks borrowing, while banks with excess cash sought lower rates for their surplus funds.
Banks utilized the standing lending facility for borrowing at higher rates, while returns on deposits held at the Central Bank were lower.
Investment analysts said Banks requires funding to meet up their respective business and regulatory demands on daily basis.
Traders reported that system liquidity improved on Tuesday, although it remained in the negative territory. Analysts said inflows from OMO maturities and FGN bond coupons drove the mild improvement in the liquidity balance in the financial market.
Nigerian interbank offered rates fell across all tenors, reflecting increased system liquidity, according to Cowry Asset Limited.
FMDQ platform data reveals that the Open Repo Rate (OPR) decreased by 74 basis points to 30.46%, while the overnight lending rate dropped by 73 basis points to 31.00%.
AIICO Capital Limited analysts forecast further improvements tomorrow as additional coupon payments are anticipated to enter the system.
This article was written by Tamaraebiju Jide, a student at Elizade University
